BILL NUMBER: AB 1353	CHAPTERED  10/10/99

	CHAPTER   701
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 6, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 9, 1999
	PASSED THE SENATE   SEPTEMBER 8, 1999
	AMENDED IN SENATE   SEPTEMBER 3, 1999

INTRODUCED BY   Committee on Health (Gallegos (Chair), Baugh (Vice
Chair), Aanestad, Bates, Corbett, Firebaugh, Kuehl, Steinberg,
Strickland, Vincent, Wayne, Wildman, and Zettel)

                        FEBRUARY 26, 1999

   An act to amend Section 14085.5 of the Welfare and Institutions
Code, relating to health.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1353, Committee on Health.  Medi-Cal:  disproportionate share
provider hospitals.
   Existing law provides for the Medi-Cal program, administered by
the State Department of Health Services, under which qualified
low-income persons are provided with health care services.
   The Medi-Cal program provides for a special methodology of
reimbursement of disproportionate share hospitals for the provision
of inpatient hospital services.
   Existing law generally defines a disproportionate share hospital
as a hospital that has disproportionately higher costs, volume, or
services related to the provision of services to Medi-Cal or other
low-income patients than the statewide average.
   Existing law provides for supplemental reimbursement of eligible
disproportionate share providers for funding capital projects.
   This bill would revise the eligibility criteria that are required
to be met in order to qualify for the supplemental reimbursement.



THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 14085.5 of the Welfare and Institutions Code is
amended to read:
   14085.5.  (a) Each disproportionate share hospital contracting to
provide services under this article or contracting with a county
organized health system, and which has or would have met the state
criteria developed pursuant to the federal medicaid requirements
regarding disproportionate hospitals for the three most recent years
prior to submitting final plans for an eligible project in accordance
with subparagraph (C) of paragraph (1) of subdivision (b), may, in
addition to the rate of payment provided for in the contract entered
into under this article, receive supplemental reimbursement to the
extent provided for in this section.
   (b) (1) (A) A hospital qualifying pursuant to subdivision (a)
shall submit documentation regarding debt service on revenue bonds
used for financing the construction, renovation, or replacement of
hospital facilities, including buildings and fixed equipment.
   (B) Qualified hospitals may submit debt service instruments to the
department and to the commission regarding debt issued for new
capital projects.
   (C) Eligible projects shall include those new capital projects
funded by new debt for which final plans have been submitted to the
Office of the State Architect and the Office of Statewide Health
Planning and Development after September 1, 1988, and prior to June
30, 1994, except that projects submitted between September 1, 1988,
and June 30, 1989, shall be eligible only if the submitting hospital
had all of the following additional characteristics during the 1989
calendar year:
   (i) No less than 400 general acute care licensed beds.
   (ii) An average Medi-Cal patient census of not less than 30
percent of the total patient days.
   (iii) No less than 50,000 emergency department visits.
   (iv) An existing basic emergency department, obstetrical services,
and a neonatal intensive care unit.
   (D) The department shall confirm in writing hospital and project
eligibility for partial financing under this section.
   (E) Department advisory letters, conditioned on hospital and
project conformity to plans, may be requested by hospitals prior to
final plan submission.
   (F) Capital projects receiving partial financing under this
section shall finance the upgrading or construction of buildings and
equipment to a level required by currently accepted medical practice
standards, including projects designed to correct Joint Commission on
Accreditation of Hospitals and Health Systems fire and life safety,
seismic, or other related regulatory standards.
   (2) Projects may also expand service capacity as needed to
maintain current or reasonably foreseeable necessary bed capacity to
meet the needs of Medi-Cal beneficiaries after giving consideration
to bed capacity needed for other patients, including unsponsored
patients.
   (3) (A) Debt service shall only be paid for projects, or for that
portion of projects, that are available and accessible to patients
treated under this article or by successor programs.
   (B) Each project shall cost at least five million dollars
($5,000,000) or, if less than five million dollars ($5,000,000), the
project shall be necessary for retention of federal and state
licensing and certification and for meeting fire and life safety,
seismic, or other related regulatory standards.
   (4) Supplemental reimbursement payments shall commence no later
than 30 days after receipt of the certificate of occupancy by the
hospital.
   (5) (A) The state shall pledge to, and agree with, the holders of
any revenue bonds issued to finance projects qualifying under this
section that until debt service on the revenue bonds is fully paid,
or until the supplemental rate is no longer required as provided by
this section, the state will not limit or alter the rights vested in
the hospital to receive supplemental reimbursement pursuant to this
section.
   (B) The state shall pledge, and the hospital shall, as a condition
of encumbering supplemental reimbursement payments received pursuant
to this section, pledge that supplemental reimbursement payments
shall be used for the payment of debt service on the revenue bonds.
The hospital shall include its pledge and the agreement with the
state in any agreement with the holders of the revenue bonds.
   (c) The hospital's supplemental reimbursement for a project
qualifying pursuant to subdivisions (a) and (b) shall be calculated
as follows:
   (1) For any fiscal year for which the hospital is eligible to
receive reimbursement, the hospital shall report to the department
the amount of debt service on the revenue bonds issued to finance the
project.
   (2) (A) The department shall use the medicaid inpatient
utilization rate as determined pursuant to Section 4112 of the
Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203) to
determine the ratio of the hospital's total paid Medi-Cal patient
days to total patient days.
   (B) (i) Notwithstanding any other provision of law, in determining
the hospital's medicaid inpatient utilization rate for the purposes
of this section, the department shall include in both the numerator
and denominator all Medi-Cal inpatient days of care provided by the
hospital after December 31, 1994, to Medi-Cal beneficiaries who are
enrolled in prepaid health plans contracting with the department.
Where reliable data regarding those days are available from Medi-Cal
prepaid health plans contracting with participating hospitals for
services rendered prior to January 1, 1995, that data may be used by
the department in the calculations.
   (ii) For purposes of this section, Medi-Cal prepaid health plan
programs, and the days relating thereto, shall include, but not be
limited to, the programs listed in paragraph (1) of subdivision (b)
of Section 14105.985, Section 14089, and any prepaid programs
implemented under Section 14087.3, including the two-plan model
described in the report issued on March 31, 1993, by the department,
entitled "The State Department of Health Services' Plan for Expanding
Medi-Cal Managed Care:  Protecting Vulnerable Populations."
   (3) (A) (i) The supplemental Medi-Cal reimbursement to the
hospital for each fiscal year shall equal the amount determined
annually in paragraph (1) multiplied by the percentage figure
determined in paragraph (2).  In no instance shall the percentage
figure determined pursuant to the ratio derived under paragraph (2)
be decreased by more than 10 percent of the initial ratio determined
pursuant to paragraph (2) prior to the retirement of the debt.
   (ii) Hospitals whose Medi-Cal ratio falls below 90 percent of the
initial level established at the point of final plan submission shall
at least maintain the volume of Medi-Cal utilization which was
recorded at the time of final plan submission unless forces beyond
the hospital's control have decreased the absolute volume of care.
   (B) (i) In no instance shall the total amount of reimbursement
received under this section combined with that received from all
other sources dedicated exclusively to debt service exceed 100
percent of the debt service over the life of the loan.
   (ii) A hospital qualifying for and receiving supplemental Medi-Cal
reimbursement shall continue to receive the reimbursement until the
qualifying loan is paid off, or the hospital is terminated as a
Medi-Cal selective contractor and the hospital does not contract with
a county organized health system.
   (iii) It is the intent of the Legislature that the state and the
qualifying hospital shall negotiate in good faith for rates
sufficient to ensure continued hospital participation in the program
and to ensure adequate access to services for Medi-Cal beneficiaries.

   (iv) The state shall not terminate a contract with a qualified
provider for the purpose of terminating the capital supplement.
   (v) If negotiations fail to permit continuation of a contract of a
hospital qualifying for the supplemental Medi-Cal reimbursement, the
supplemental Medi-Cal reimbursement shall cease as of the date of
discontinuance of the selective provider contract.
   (4) In order to ensure provision of qualified supplemental
payments to disproportionate share hospitals contracting with county
organized health systems, the department shall make the qualified
supplemental payments directly to these hospitals.
   (5) Funding for these supplemental payments shall be separately
appropriated as a line item in the Budget Act for each fiscal year
for any project for which a request for payment is received after
April 1 of each fiscal year.  The department shall request a
deficiency appropriation if funds for the payment are not
appropriated in the Budget Act.
   (6) The department shall provide the Department of Finance, the
Legislative Analyst, and the Joint Legislative Budget Committee with
its estimate of the budget year costs of the supplemental
reimbursement program, on January 10 and May 15 of each year.
   (7) (A) Paragraphs (1) to (4), inclusive, shall be incorporated
into an amendment to any contract entered into by a hospital pursuant
to this article.
   (B) (i) Any contract amendment required by paragraph (A) shall
include a payment methodology based on inpatient hospital services
rendered to Medi-Cal patients, either on a per diem basis, a
per-discharge basis, or any other federally permissible basis, and
which is consistent with the hospital's Medi-Cal contract.
   (ii) The payment methodology specified in clause (i) shall ensure
that the hospital, on an annual basis, receives the amount of
supplemental reimbursement calculated pursuant to paragraph (3),
excluding only the federal portion of costs which have been
determined by the federal government not to be allowable under Title
XIX of the federal Social Security Act (Subchapter 19 (commencing
with Section 1396) of Chapter 7 of Title 42 of the United States
Code).
   (iii) The payment methodology specified in clause (i) shall
contain a retrospective adjustment mechanism to ensure that,
regardless of the payment methodology, the department shall pay the
hospital the full amount owed to the hospital for the year, as
determined pursuant to this section.
   (8) In negotiating contracts with hospitals receiving payments
under this section, the commission shall take appropriate steps to
ensure the duplicate payments are not made to the hospital for the
debt service costs relating to the eligible project.
   (d) All reimbursement received by a hospital pursuant to this
section shall be placed in a special account, the funds in which
shall be used exclusively for the payment of debt service on the
revenue bonds issued to finance the project.
   (e) If contracting under this section is superseded by other
arrangements for payment of inpatient hospital services, the
successor program shall include separate reimbursement, as determined
pursuant to paragraph (3) of subdivision (c).
   (f) (1) For purposes of this section, "revenue bonds" are defined
as that term is defined in subdivision (c) of Section 15459 of the
Government Code, and shall also include general obligation bonds
issued by or on behalf of eligible hospitals for projects of more
than five million dollars ($5,000,000).
   (2) (A) The aggregate principal amount of general obligation bonds
to be issued as revenue bonds under this subdivision for the
anticipated allowable portion of projects shall not, in any fiscal
year, exceed a statewide amount established in the Medi-Cal estimates
submitted to the fiscal committees of the Legislature pursuant to
Section 14100.5, or as otherwise statutorily determined by the
Legislature.
   (B) In preparing Medi-Cal estimates, the department shall
consider, but need not include, all actual and anticipated projects.

   (g) (1) The department shall promptly seek any necessary federal
approvals for the implementation of this section, and, if necessary
to obtain federal approval, the department may, for federal purposes,
limit the program to those costs which are allowable expenditures
under Title XIX of the federal Social Security Act (Subchapter 19
(commencing with Section 1396) of Chapter 7 of Title 42 of the United
States Code), subject to paragraph (2).
   (2) The department shall continue to be responsible for the
reimbursement of eligible providers from state funds for the amount
of supplemental reimbursement pursuant to paragraph (3) of
subdivision (c), excluding only the federal portion of costs which
have been determined by the federal government not to be allowable
under Title XIX of the federal Social Security Act.
   (h) (1) A hospital receiving supplemental reimbursement pursuant
to this section shall be liable for any reduced federal financial
participation resulting from the implementation of this section.
   (2) The department shall submit claims for federal financial
participation for all elements of the supplemental reimbursements
which are allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures which are allowable under federal law.
   (4) (A) The department may require that hospitals receiving
supplemental reimbursement submit data necessary for the department
to determine the appropriate amounts to claim as expenditures
qualifying for federal financial participation.
   (B) Unless otherwise permitted by federal law, the total statewide
payment under the selective provider contracting program, in the
aggregate on an annual basis, shall not exceed an amount that would
otherwise have been paid under the Medi-Cal program on a statewide
basis for the same services, in the aggregate on an annual basis, if
the contracting program were not implemented.
   (i) (1) Subject to paragraph (2), any hospital that met the
criteria specified in subdivision (a) at the time it submitted its
final plans for an eligible project in accordance with subparagraph
(C) of paragraph (1) of subdivision (b) shall continue to receive
reimbursement as set forth in this section irrespective of whether or
not the hospital qualifies as a disproportionate share hospital
after submission of its final plans.
   (2) A hospital that fails to meet the criteria for
disproportionate share status on or before June 30, 2002, shall be
required to submit data to the department that demonstrates that the
hospital failed to meet the criteria for a disproportionate share
hospital because its low-income utilization rate, as determined
pursuant to Section 4112 of the Omnibus Budget Reconciliation Act of
1987 (Public Law 100-203), does not exceed 25 percent due to one or
more of the following factors:
   (A) An increase in outpatient utilization.
   (B) A decrease in the average length of stay for Medi-Cal
beneficiaries or charity care patients due to technological advances
in the provision of care.
   (C) Increased implementation within the state of Medi-Cal prepaid
health plan programs.
   (D) The level of reimbursement that the hospital receives for
outpatient visits.
   (E) Other circumstances beyond the hospital's control that affect
the hospital's ability to meet the criteria for disproportionate
status, even though the hospital continues to have a mission to
provide care to Medi-Cal and charity care patients.
